Canadian territory hopes for shale oil riches

By Jeffrey Jones

3 Min Read

CALGARY, Alberta (Reuters) - A new oil prospect in Canada's Northwest Territories could give the sparsely populated region a boost after years of costly delays in approving a big natural gas pipeline had frustrated economic hopes, a government official said on Thursday.

The Canol shale deposit near Norman Wells, in central Northwest Territories, has been the target of brisk bidding for drilling rights, David Ramsay, the territory's minister of industry, tourism and investment said, with the value of work commitments by oil companies now at C$628 million ($623 million).

Recoverable oil resources in what is known as the Sahtu region are estimated at 2 billion to 3 billion barrels. Ramsay said in an interview that industry and government officials hope that development of the deposit could mirror what has happened in the Bakken region of North Dakota and Saskatchewan, where shale oil production has surged in recent years,

"The same technology will be used to extract the oil from the shale in the Northwest Territories as in the Bakken," he said. "It's a very exciting time for us. We have the opportunity to transform the economy in the region and in the territory."

Companies that have amassed land in the area include Husky Energy Inc, Royal Dutch Shell Plc, ConocoPhillips and MGM Energy Corp.

The vast northern territory has been waiting for years for the start of construction of the C$16.2 billion Mackenzie Gas project, which would ship 1.2 billion cubic feet of gas a day to southern markets from fields on the coast of the Beaufort Sea.

First envisioned in the 1970s, the project has been touted as a way to provide badly needed jobs and economic development.

During a years-long regulatory process, however, the North American gas market changed with the development of shale gas supplies much closer to major markets, and now the project's viability is questionable with prices for the fuel stuck near decade lows.

However, drilling and completion technology used for shale gas, including horizontal wells and hydraulic rock fracturing, is now transforming conventional oil and liquids-rich gas prospects across the continent.

Ramsay pointed out that the Norman Wells region is no stranger to oil development. Imperial Oil first started producing crude there in the early 1920s.

He said one major benefit of the deposit is that there is already a 39,400 barrel a day pipeline, operated by Enbridge Inc, that extends 870 km (540 miles) to Zama in northern Alberta from Norman Wells. It is running at about 20 percent capacity.

"This coming winter we'll probably see at least a three- or fourfold increase in activity, so there's going to be a lot of opportunities for people to work. We've got some smaller communities in the Sahtu and that's where as a government we've been challenged to try to tackle the high unemployment."